DATED AS OF
JANUARY 30, 1998
BY AND BETWEEN
AUTOBOND ACCEPTANCE CORPORATION,
AS THE ISSUER,
BANCBOSTON INVESTMENTS, INC.
AS THE PURCHASER
AGREEMENT, dated as of January 30, 1998, between AutoBond Acceptance
Corporation (the "Company") and BANCBOSTON INVESTMENTS, INC. (the "Purchaser").
The parties hereto agree as follows:
SECTION I.1. DEFINITIONS. The following terms, as used herein, have the
"Additional Closing Date" means the date after the initial Closing Date
agreed between the Company and the Purchaser.
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary of the
Subject Person) which is Controlled by or is under common Control with a
"Agreement" means this Purchase Agreement, as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the State of Texas or the Commonwealth of
Massachusetts are authorized or required by law to close.
"Closing Date" means the date on which all of the conditions set forth
in Sections 5.1 and 5.2 shall have been satisfied and the Securities have been
issued by the Company and the Purchase Price paid by the Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"Common Stock" means the common stock, no par value per share, of the
"Company" means AutoBond Acceptance Corporation, a corporation
incorporated under the laws of Texas, and its successors.
"Company Corporate Documents" means the certificate of incorporation and
by-laws of the Company.
"Consolidated Subsidiary" means at any date with respect to any Person
any Subsidiary or other entity, the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
"Convertible Notes" means the Company's 15% Subordinated Convertible
Notes due 2001, issued pursuant to the Indenture.
"Directors" means the individuals then serving on the board of directors
or similar such management council of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Finance Contracts" means fixed rate, closed end consumer installment
finance contracts acquired by the Company in the ordinary course of its business
arising from the sale of new and used automobiles, vans and light-duty trucks.
"Financing Documents" means this Agreement, the Warrant, the Indenture,
and the Notes and any document, instrument, certificate or other agreement
executed, delivered or contemplated by the foregoing.
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person
"Indenture" means the Indenture, dated as of January 30, 1998, between
the Company and BankBoston, N.A., as agent.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time deposit
"Lien" means, any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction, security
interest, collateral assignment or other adverse claim, whether arising by
contract or under law or otherwise (including, without limitation, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing).
"Notes" means the Convertible Notes and the Subordinated Notes.
"Nasdaq Market" means the Nasdaq Stock Market's National Market.
"Officer's Certificate" shall mean a certificate executed by the chief
executive officer or chief operating officer of the Company in the form of
Exhibit B attached hereto.
"Permits" means all domestic and foreign licenses, permits and approvals
required for the full operation of the Company and the Subsidiaries, including
state, federal, city and county permits and approvals.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.1 hereof.
"Purchaser" means, BancBoston Investments, Inc.
"SEC Reports" shall have the meaning set forth in Section 3.5.
"Securities" means the Subordinated Notes, Convertible Notes, the
Warrants and, as applicable, the shares of Common Stock issuable upon conversion
of the Convertible Notes and the exercise of the Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
"Subordinated Notes" means the Company's 15% Senior Subordinated Notes
due 2001, issued pursuant to the Indenture.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of the capital stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person. Unless specified to the contrary, "Subsidiary"
means a Subsidiary of the Company.
"Subsidiary Corporate Documents" means the certificates of incorporation
and by-laws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Warrant" means each of the Warrant to be issued to the Purchaser on the
Closing Date to purchase 368,462 shares of Common Stock in the aggregate
(subject to adjustment as set forth therein) , and, at the Purchaser's option,
the Warrant to purchase additional shares of Common
Stock that may be issued on the Additional Closing Date.
SECTION I.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis (except for changes concurred in by the Company's
independent public accountants) ("GAAP"). All references to "dollars," "Dollars"
or "$" are to United States dollars unless otherwise indicated.
PURCHASE AND SALE OF SECURITIES
SECTION II.1. COMMITMENT TO PURCHASE. (a) Subject to the terms and
conditions set forth herein, the Company agrees to issue and sell and, subject
to the terms and conditions set forth herein and in reliance on the
representations and warranties of the Company contained herein, the Purchaser
agrees to purchase, the Securities as set forth below.
(b) On the Closing Date, the Purchaser shall acquire the Notes in an
aggregate principal amount of $7,500,000.
(c) In consideration of the Purchaser's agreement to purchase the Notes
specified in this Article II, the Company shall issue and deliver to the
Purchaser, on the Closing Date, the Warrant.
(d) The aggregate consideration to be paid on the Closing Date by the
Purchaser to the Company for the Notes and the Warrants shall be $7,500,100 (the
SECTION II.2. PURCHASE OF SECURITIES. (a) On the Closing Date, subject
to the satisfaction of all terms and conditions set forth herein, each of the
Purchasers shall deliver by wire transfer to the account or accounts specified
by the Company immediately available funds in an amount equal to the Purchase
(b) On the Closing Date, against payment as set forth in subsection 2.2
(a) above, the Company shall deliver to the Purchaser (i) a single Note for the
Purchaser representing the combined principal amounts of the Convertible Note
and the Subordinated Note acquired by the Purchaser as of the Closing Date, and
(ii) a single Warrant for the Purchaser.
SECTION II.3. PURCHASE ON THE ADDITIONAL CLOSING DATE. (a) At the
Purchaser's option, the Purchaser may increase (i) the aggregate principal
amount of the Subordinated Notes and the Convertible Notes, and (ii) the number
of shares of Common Stock subject to the Warrant, against payment to the Company
of such additional amounts (the "Additional Purchase Price") as may be agreed
between the Purchaser and the Company. The settlement of such transaction shall
take place on the Additional Closing Date.
(b) The Additional Closing Date shall be subject to such terms and
agreed between the parties.
(c) On the Additional Closing Date, at the Purchaser's option, the
Company will issue additional Subordinated Notes, Convertible Notes (or a
combination thereof) and Warrants to the Purchaser in respect of such increased
amounts, or exchange the Purchaser's existing Securities for newly issued
Securities reflecting such increased amounts.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the Closing
Date as set forth herein.
SECTION III.1. CORPORATE EXISTENCE AND POWER. The Company and each
Subsidiary is a corporation (or other legal entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to conduct business as a foreign
corporation, and has all corporate power and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted and as proposed to be conducted, except where such
failure would not have a material adverse effect on the Company or the ability
of the Company to continue its current operations.
SECTION III.2. AUTHORIZATION AND EXECUTION. The execution, delivery and
performance by the Company of each Financing Document and the issuance by the
Company of the Securities have been duly and validly authorized and are within
its corporate powers. Each Financing Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding agreement of the
Company. Each of the Financing Documents constitutes the valid and binding
obligation of the Company, in each case enforceable against the Company in
accordance with its respective terms, subject to (i) applicable bankruptcy,
insolvency or similar laws affecting the enforceability of creditors rights
generally and (ii) equitable principles of general applicability.
SECTION III.3. GOVERNMENTAL AUTHORIZATION; THE SECURITIES. The execution
and delivery by the Company of the Financing Documents does not and will not,
the issuance and sale by the Company of the Securities does not and will not,
and the consummation of the transactions contemplated hereby and thereby will
not, require any action by or in respect of, or filing with, any governmental
body, agency or governmental official except (a) such actions or filings that
have been undertaken or made by the Company at its sole cost and expense prior
to the date hereof and that will be in full force and effect (or as to which all
applicable waiting periods have expired) on and as of the date hereof or which
are not required to be filed on or prior to the Closing Date, (b) such actions
or filings that, if not obtained, would not in the aggregate impose materially
adverse conditions upon the Company or the Purchaser and (c) listing
applications ("Listing Applications") to be filed by the Company at its sole
cost and expense with the Nasdaq Market or the American Stock Exchange relating
to the shares of Common Stock issuable upon conversion of the Convertible Notes
and exercise of the Warrants.
Upon conversion in accordance with the terms of the Convertible Notes, or upon
exercise in accordance with the terms of the Warrants (assuming the payment of
the exercise price set forth in the Warrants), the shares of Common Stock when
issued upon conversion or exercise thereof shall be duly and validly issued and
outstanding, fully paid and nonassessable, free and clear of any claims or
pre-emptive rights. Assuming the representations and warranties of the Purchaser
herein are true and correct in all material respects, each of the Securities
will have been issued in material compliance with all applicable U.S. federal
and state securities laws.
SECTION III.4. CONTRAVENTION. The execution and delivery by the Company
of the Financing Documents, the issuance and sale by the Company of the
Securities (and the application of the proceeds thereof as contemplated herein),
and the consummation of the transactions contemplated hereby and thereby will
not contravene or constitute a default under or violation of (i) any provision
of applicable law or regulation, (ii) the Company Corporate Documents or the
Subsidiary Corporate Documents, (iii) any agreement, judgment, injunction,
order, decree or other instrument binding upon the Company or any Subsidiary or
any of their respective assets, or result in the creation or imposition of any
Lien on any asset of the Company or any Subsidiary. The Company and each
Subsidiary is in compliance with all statutes, laws, ordinances, rules,
regulations, orders, restrictions and all other legal requirements of any
domestic or foreign government or any instrumentality thereof having
jurisdiction over the conduct of its businesses or the ownership of its
properties, except where such failure would not have a material adverse effect
on the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and its Subsidiaries taken as a whole.
SECTION III.5. FINANCIAL INFORMATION AND SEC REPORTS. The Company has
timely filed all forms, reports and documents with the Commission since November
8, 1996, required to be filed by it under the Exchange Act and the Securities
Act through the date hereof (collectively, the "SEC Reports"). Such SEC Reports,
at the time filed, complied in all material respects with the requirements of
the Exchange Act. None of the SEC Reports, including without limitation any
financial statements or schedules included therein, contained, as of their
respective dates, any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. There have been no
adverse changes in the Company's business, properties, results of operations,
condition (financial or otherwise) or prospects since September 30, 1997, other
than as disclosed in Amendment No. 1 to the Company's Registration Statement on
Form S-1 (File No. 333-41257), and except for decreases in the Company's
liquidity, increases in short-term payables (including an increase from
September 30, 1997 of approximately $4 million in short-term payables reflected
as "bank overdraft"), and possible revaluation of Interest-only Strip
Receivables. The Company reasonably expects to report an increase in
shareholder's equity at December 31, 1997 from September 30, 1997, provided that
a securitization within the parameters set forth in its warehouse lending
arrangements is completed prior to March 31, 1998. The audited and unaudited
consolidated balance sheets of the Company and its Subsidiaries contained in the
SEC Reports, and the related consolidated statements of income, changes in
stockholders equity and changes in cash flows, including the footnotes thereto,
except as indicated therein, have been prepared in accordance with GAAP
consistently followed throughout the periods indicated, except that the
unaudited financial statements do not contain complete notes and may be subject
to normal audit adjustments and normal annual adjustments. The consolidated
balance sheets fairly present the financial condition of the Company and its
Subsidiaries at the date thereof and the related statements of income,
stockholders equity and changes in cash flows fairly present the results of the
operations of the Company and its Subsidiaries and the changes in their
financial position for the periods indicated.
SECTION III.6. LITIGATION. There is no action, suit or proceeding
pending or, to the knowledge of the Company, threatened, against the Company or
any Subsidiary, before any court or arbitrator or any governmental body, agency
or official in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Company and
its Subsidiaries taken as a whole, or which challenges the validity of any
SECTION III.7. TAXES. All United States federal, state, county,
municipality local or foreign income tax returns and all other material tax
returns (including foreign tax returns) which are required to be filed by or on
behalf of the Company and each Subsidiary have been filed and all material taxes
due pursuant to such returns or pursuant to any assessment received by the
Company and each Subsidiary have been paid except those being disputed in good
faith and for which adequate reserves have been established. The charges,
accruals and reserves on the books of the Company and each Subsidiary in respect
of taxes or other governmental charges have been established in accordance with
SECTION III.8. INVESTMENTS, JOINT VENTURES. The Company has no
Subsidiaries or other direct or indirect Investment in any Person, and the
Company is not a party to any partnership, management, shareholders' or joint
venture or similar agreement, other than as indicated in the SEC Reports.
SECTION III.9. NOT AN INVESTMENT COMPANY. Neither the Company nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION III.10. CAPITALIZATION. As of the date hereof, the authorized,
issued and outstanding capital stock of the Company is as set forth in the SEC
Reports. Other than as set forth in the SEC Reports and except for (a) a warrant
to purchase 7,500 shares of Common Stock, and (b) stock options for 150,000
shares of Common Stock issued to the Company's President-elect, there are no
other subscriptions, options, warrants, rights (including, without limitation,
preemptive rights), convertible securities, exchangeable securities or other
agreements or commitments of any character pursuant to which the Company is
required to issue any shares of its capital stock.
SECTION III.11. SOLICITATION. No form of general solicitation or general
advertising was used by the Company or, to the best of its actual knowledge, any
other Person acting on behalf of the Company in connection with the offer and
sale of the Securities. Neither the Company, nor, to its knowledge, any Person
acting on behalf of the Company, has, either directly or indirectly, sold or
offered for sale to any Person (other than the Purchaser) any of the Securities
and the Company represents that neither itself nor any Person authorized to act
on its behalf (except that the Company makes no representation as to the
Purchaser and its Affiliates) will sell or offer for sale any such security to,
or solicit any offers to buy any such security from, or otherwise approach or
negotiate in respect thereof with, any Person or Persons so as thereby to
cause the issuance or sale of any of the Securities to be in violation of any of
the provisions of Section 5 of the Securities Act.
SECTION III.12. PERMITS. (a) Each of the Company and its Subsidiaries
has all material Permits as are necessary for the conduct of its business as it
has been carried on; (b) all such Permits are in full force and effect, and each
of the Company and its Subsidiaries has fulfilled and performed all material
obligations with respect to such Permits; (c) no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
by the issuer thereof or which results in any other material impairment of the
rights of the holder of any such Permit; and (d) the Company has no reason to
believe that any governmental body or agency is considering limiting, suspending
or revoking any such Permit.
SECTION III.13. LEASES. Except as disclosed in the SEC Reports, neither
the Company nor any Subsidiary is a party to any capital lease obligation with a
value greater than $100,000 or to any operating lease with an aggregate annual
rental greater than $100,000 during the life of such lease.
SECTION III.14. ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS.
There are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, other than (i)
those liabilities and circumstances disclosed in the SEC Reports, and (ii)
short-term liabilities, a material portion of which will be extinguished with
the proceeds from the sale of the Securities.
SECTION III.15. INSURANCE. The Company and its Subsidiaries maintain,
with financially sound and reputable insurance companies, insurance in at least
such amounts and against such risks such that any uninsured loss would not have
a material adverse effect on the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Company. All insurance
coverages of the Company and its Subsidiaries are in full force and effect and
there are no past due premiums in respect of any such insurance. Upon request of
the Purchaser, the Company will provide copies of all such insurance policies to
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION IV.1. PURCHASE FOR INVESTMENT; AUTHORITY; BINDING AGREEMENT. The
Purchaser hereby represents and warrants to the Company that:
(a) the Purchaser is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act and the Securities to be acquired by it pursuant
to this Agreement are being acquired for its own account and not with a view
toward, or for sale in connection with, any distribution thereof, except in
compliance with applicable United States federal and state securities law;
provided that the disposition of the Purchaser's property shall at all times be
and remain within its control;
(b) the execution, delivery and performance of this Agreement and the
purchase of the Securities pursuant hereto are within the Purchaser's corporate
or partnership powers, as applicable, and have been duly and validly authorized
by all requisite corporate or partnership action;
(c) this Agreement has been duly executed and delivered by the
(d) the execution and delivery by the Purchaser of the Financing
Documents to which it is a party does not, and the consummation of the
transactions contemplated hereby and thereby will not, contravene or constitute
a default under or violation of (i) any provision of applicable law or
regulation, or (ii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Purchaser;
(e) Purchaser understands that the Securities have not been registered
under the Securities Act and may not be transferred or sold except as
contemplated by the Financing Documents;
(f) this Agreement constitutes a valid and binding agreement of the
Purchaser enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency or similar laws affecting the enforceability of creditors
rights generally and (ii) equitable principles of general applicability;
(g) the Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Securities and the Purchaser is capable of bearing the
economic risks of such investment;
(h) the Purchaser is knowledgeable, sophisticated and experienced in
business and financial matters; the Purchaser has previously invested in
securities similar to the Securities and fully understands the limitations on
transfer described herein; the Purchaser has been afforded access to information
about the Company and the consolidated financial condition, results of
operations, property, management and prospects of the Company and it
Subsidiaries sufficient to enable it to evaluate its investment in the
Securities; the Purchaser has been afforded the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and the risks of investing in the
Securities; and the Purchaser has been afforded the opportunity to obtain such
additional information which the Company possesses or can acquire that is
necessary to verify the accuracy and completeness of the information given to
the Purchaser concerning the Company. The foregoing does not in any way relieve
the Company of its representations and other undertakings hereunder, and shall
not limit the Purchasers' ability to rely thereon; and
(i) no part of the source of funds used by the Purchaser to acquire the
Securities constitutes assets allocated to any separate account maintained by
the Purchaser in which any employee benefit plan (or its related trust) has any
CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
SECTION V.1. CLOSING. The obligations of the Purchaser to purchase the
Securities to be issued and sold pursuant to this Agreement are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Receipt by the Purchaser of duly executed counterparts of this
Agreement and the Indenture;
(b) The Purchaser shall have received the opinion, dated the Closing
Date, of Jones, Day, Reavis & Pogue, substantially in the form attached as
Exhibit A hereto.
(c) The Notes shall have been duly executed by the Company as provided
in the Indenture;
(d) The Purchaser shall have received an Officer's Certificate executed
by the chief executive officer or chief operating officer of the Company, in the
form attached as Exhibit B hereto.
(e) The Company Corporate Documents and the Subsidiary Corporate
Documents, if any, shall be in full force and effect and no term or condition
thereof shall have been amended, waived or otherwise modified without the prior
written consent of the Purchasers;
(f) The Warrant shall have been duly executed by the Company.
(g) There shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that challenges the validity of or purports to
affect any Financing Document or transaction contemplated hereby or thereby or
that could reasonably be expected to have a material adverse effect on the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and its Subsidiaries, taken as a whole,
the enforceability of the Financing Documents or the Securities or the rights of
the holders of the Securities or the Purchasers hereunder;
(h) The representations and warranties of the Company contained in each
Financing Document shall be true and correct in all respects (in the case of any
representation or warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty without any
materiality qualification) and the Company shall have performed and complied
with all covenants and agreements required by such Financing Documents to be
performed or complied with by it at or prior to the Closing Date;
(i) The Purchaser shall have confirmed receipt of the Notes and the
Warrants to be issued, duly executed by the Company in the denominations and
registered in the name or names requested by the Purchaser;
(j) The Purchaser shall have received a duly executed Stockholder's
Agreement, dated January 30, 1998, among the Purchaser, the Company, William O.
Winsauer and John S.
(k) There shall not have occurred any disruption or adverse change in
the financial or capital markets generally, or in the market for the Common
Stock, which the Purchaser reasonably deems material in connection with the
purchase of the Securities.
SECTION V.2. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company to issue and sell to the Purchaser the Securities to be issued and
sold pursuant to this Agreement are subject to the satisfaction, at or prior to
the Closing Date, of the following conditions:
(a) The representations and warranties of the Purchaser contained herein
shall be true and correct in all material respects on the Closing Date and the
Purchaser shall have performed and complied in all material respects with all
agreements required by this Agreement to be performed or complied with by the
Purchasers at or prior to the Closing Date;
(b) The issue and sale of the Securities by the Company shall not be
prohibited by any applicable law, court order or governmental regulation;
(c) Receipt by the Company of duly executed counterparts of this
Agreement and Indenture; and
(d) The Company shall have received payment of the Purchase Price of the
Notes and Warrant.
The Company hereby agrees that, from and after the date hereof for so
long as any Securities remain outstanding and for the benefit of the Purchaser:
SECTION VI.1. INFORMATION. The Company will deliver to the Purchaser:
(a) promptly after the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Company or any Subsidiary has filed with the Commission;
(b) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed and any other document generally distributed to shareholders;
(c) promptly following the mailing thereof, monthly administrative and
(d) the data indicated on Schedule 1 hereto;
(e) as soon as available and in any event within forty-five (45) days
after the close of each of the first, second and third fiscal quarters of the
Company, the consolidated balance sheet of the Company and its Subsidiaries as
at the end of such period and the related consolidated statements of income,
retained earnings and cash flows of the Company and its Subsidiaries for such
period, setting forth in each case in comparative form the figures for the
corresponding periods of the previous fiscal year, all of which shall be
certified by the chief financial officer of the Company to present fairly, in
accordance with GAAP, the consolidated financial position of the Company and its
Subsidiaries as at the date thereof and the results of operations for such
period (subject to normal year-end audit adjustments);
(f) as soon as available and in any event within ninety (90) days after
the end of each fiscal year of the Company, the audited consolidated balance
sheet of the Company and its Subsidiaries as at the end of such fiscal year and
the related audited consolidated statements of income, retained earnings and
cash flows of the Company and its Subsidiaries for such fiscal year, setting
forth in comparative form the figures as at the end of and for the previous
fiscal year, all of which shall be certified by (i) the chief financial officer
of the Company to present fairly, in accordance with GAAP, the financial
position of the Company and its Subsidiaries as at the date thereof and the
result of operations for such period and (ii) the Company's independent
certified public accountants, whose certificate shall be unqualified; and
(g) the information specified for delivery to the Agent in the
SECTION VI.2. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company and
each Subsidiary will keep proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to their respective businesses and activities; and will permit, during normal
business hours, the Purchaser, or an affiliate thereof, to visit and inspect any
of their respective properties, upon reasonable prior notice, to examine and
make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective executive
officers and independent public accountants, all at such reasonable times.
SECTION VI.3. USE OF PROCEEDS. The net proceeds from the issuance and
sale of the Securities by the Company shall be used solely for short term
payables, the provision for repayment of the Company's 18% Convertible Secured
Notes (if necessary) and for working capital. None of the proceeds from the
issuance and sale of Securities by the Company pursuant to this Agreement will
be used directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "margin stock" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System.
SECTION VI.4. RESERVED SHARES AND LISTINGS.
(a) The Company will reserve from its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to permit issuance of
the conversion in full of the then outstanding Convertible Notes and the
exercise in full of the then outstanding Warrants; and
(b) The Company will maintain the listing of its Common Stock on the
Nasdaq Market or any national securities exchange.
SECTION VI.5. NONVOTING COMMON STOCK. The Company agrees to cause the
amendment of its Certificate of Incorporation prior to June 1, 1998, to provide
for the creation of a class of nonvoting Common Stock, which shall otherwise
rank pari passu in all respects with the existing class of voting Common Stock
of the Company, and to reserve from its authorized but unissued shares of such
class of Nonvoting Common Stock a sufficient number of shares of such Common
Stock to permit issuance of such shares upon the conversion in full of the then
outstanding Convertible Notes and Warrants.
SECTION VI.6 RIGHT OF FIRST REFUSAL. The Purchaser, so long as it is the
holder of the Warrant, shall have a right of first refusal to purchase all
future securities to be privately placed by the Company on a pro rata basis and
on the same terms, conditions and price as those securities purchased by other
purchasers; provided however, that the exercise of such right does not, in the
reasonable judgment of the Board of Directors of the Company, adversely impact
the viability of such placement in any material way.
SECTION VI.7 PREFERRED STOCK. The Company agrees to use its best efforts
to complete the offer and sale of up to $10 million of its __% Series A
Cumulative Preferred Stock.
SECTION VI.8 ACCOUNTING.
(a) The Company will not change its independent auditors without
the prior written consent of the Purchaser, which consent shall not unreasonably
(b) The Company will not make any significant change in
accounting treatment or reporting practices, except as required by GAAP (in
which event the Company shall provide the Purchaser with a summary of such
changes and the effect on the Company's financial statements).
LIMITATION ON TRANSFERS
SECTION VII.1. RESTRICTIONS ON TRANSFER. From and after their respective
dates of issuance, none of the Securities shall be transferable except upon the
conditions specified in this Article VII, which conditions are intended to
ensure compliance with the provisions of the Securities Act in respect of the
Transfer of any of such Securities or any interest therein. Each Purchaser will
use its best efforts to cause any proposed transferee of any Securities held by
it to agree to take and hold such Securities subject to the provisions and upon
the conditions specified in this Article VII.
SECTION VII.2. RESTRICTIVE LEGENDS.
(a) Each certificate for Securities issued to a Purchaser or to a
subsequent transferee shall include a legend in substantially the following
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF THE CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) TO QUALIFIED
INSTITUTIONAL BUYERS, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE,
OR (D) IF REGISTERED UNDER THE SECURITIES ACT.
SECTION VII.3. NOTICE OF PROPOSED TRANSFERS. Prior to any proposed
Transfer of the Securities other than a transfer (i) registered under the
Securities Act, (ii) to an affiliate of a Purchaser which is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act, provided
that any such transferee shall agree to be bound by the terms of this Agreement,
and (iii) to be made in reliance on Rule 144 under the Securities Act, the
holder thereof shall give written notice to the Company of such holder's
intention to effect such Transfer, setting forth the manner and circumstances of
the proposed Transfer, which shall be accompanied by (A) an opinion of counsel
to the transferor, confirming that such transfer does not give rise to a
violation of the Securities Act (which requirement may be waived by the
Company), (B) representation letters in form and substance reasonably
satisfactory to the Company to ensure compliance with the provisions of the
Securities Act and (C) letters in form and substance reasonably satisfactory to
the Company from each such transferee stating such transferee's agreement to be
bound by the terms of this Agreement. Such proposed Transfer may be effected
only if the Company shall have received such notice of transfer, opinion of
counsel, representation letters and other letters referred to in the immediately
preceding sentence, whereupon the holder of such Securities shall be entitled to
Transfer such Securities in accordance with the terms of the notice delivered by
the holder to the Company.
SECTION VIII.1. NOTICES. All notices, demands and other communications
to any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties. Each such notice, demand or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified on the signature page hereof, (ii)
if given by mail, four days after such communication is deposited in the mail
with first class postage prepaid, addressed as aforesaid or (iii) if given by
any other means, when delivered at the address specified in or pursuant to this
SECTION VIII.2. NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party in exercising any
right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
(b) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such amendment, supplement or waiver is in writing and
is signed by the Company and the Purchaser.
SECTION VIII.3. INDEMNIFICATION. (a)The Company agrees to indemnify and
hold harmless each Purchaser, its affiliates, and each Person, if any, who
controls such Purchaser, or any of its affiliates, within the meaning of the
Securities Act or the Exchange Act (a Controlling Person"), and the respective
partners, agents, employees, officers and directors of the Purchasers, their
affiliates and any such Controlling Person (each an Indemnified Party" and
collectively, the "Indemnified Parties"), from and against any and all losses,
claims, damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any such
claim or action, whether or not such Indemnified Party is a party thereto,
provided that the Company shall not be obligated to advance such costs to any
Indemnified Party other than the Purchasers unless it has received from such
Indemnified Party an undertaking to repay to the Company the costs so advanced
if it should be determined by final judgment of a court of competent
jurisdiction that such Indemnified Party was not entitled to indemnification
hereunder with respect to such costs) which may be incurred by such Indemnified
Party in connection with any investigative, administrative or judicial
proceeding brought or threatened that relates to or arises out of, or is in
connection with any activities contemplated by any Financing Document or any
other services rendered in connection herewith; provided that the Company will
not be responsible for any claims, liabilities losses, damages or expenses that
are determined by final judgment of a court of competent jurisdiction to result
solely from such Indemnified Party's gross negligence, willful misconduct or bad
faith or its breach of the obligations of it or any Affiliate under any
If any action shall be brought against an Indemnified Party with respect
to which indemnity may be sought against the Company under this Agreement, such
Indemnified Party shall promptly notify the Company in writing and the Company,
at its option, may, assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party and payment of all
reasonable fees and expenses. The failure to so notify the Company shall not
affect any obligations the Company may have to such Indemnified Party under this
Agreement or otherwise unless the Company is materially adversely affected by
such failure. Such Indemnified Party shall have the right to employ separate
counsel in such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party,
unless: (i) the Company has failed to assume the defense and employ counsel or
(ii) the named parties to any such action (including any impleaded parties)
include such Indemnified Party and the Company, and such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company, in which case, if such Indemnified Party notifies the Company in
writing that it elects to employ separate counsel at the expense of the Company,
the Company shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, provided, however, that the
Company shall not, in connection with any one such action or proceeding or
separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be responsible hereunder for
the reasonable fees and expenses of more than one such firm of separate counsel,
in addition to any local counsel, which counsel shall be designated by the
Purchasers. The Company shall not be liable for any settlement of any such
action effected without the written consent of the Company (which shall not be
unreasonably withheld) and the Company agrees to indemnify and hold harmless
each Indemnified Party from and against any loss or liability by reason of
settlement of any action effected with the consent of the Company. In addition,
the Company will not, without the prior written consent of the Purchasers,
settle or compromise or consent to the entry of any judgment in or otherwise
seek to terminate any pending or threatened action, claim, suit or proceeding in
respect to which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Party is a party thereto) unless such
settlement, compromise, consent or termination includes an express unconditional
release of the Purchasers and the other Indemnified Parties, satisfactory in
form and substance to the Purchasers, from all liability arising out of such
action, claim, suit or proceeding.
If for any reason the foregoing indemnity is unavailable (otherwise than
pursuant to the express terms of such indemnity) to an Indemnified Party or
insufficient to hold an Indemnified Party harmless, then in lieu of indemnifying
such Indemnified Party, the Company shall contribute to the amount paid or
payable by such Indemnified Party as a result of such claims, liabilities,
losses, damages, or expenses (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and by the
Purchasers on the other from the transactions contemplated by this Agreement or
(ii) if the allocation provided by clause (i) is not permitted under applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits received by the Company on the one hand and the Purchasers on the
other, but also the relative fault of the Company and the Purchasers as well as
any other relevant equitable considerations. Notwithstanding the provisions of
this Section 8.3, the aggregate contribution of all Indemnified Parties shall
not exceed the amount of interest and fees actually received by the Purchasers
pursuant to this Agreement. It is hereby further agreed that the relative
benefits to the Company on the one hand and the Purchasers on the other with
respect to the transactions contemplated hereby shall be determined by reference
to, among other things, whether any untrue or alleged untrue statement of
material fact or the omission or alleged omission to state a material fact
related to information supplied by the Company or by the Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
The indemnification, contribution and expense reimbursement obligations
set forth in this Section 8.3 (a)(i) shall be in addition to any liability the
Company may have to any Indemnified Party at common law or otherwise and (ii)
shall survive the termination of this Agreement and the other Financing
Documents and the payment in full of the Notes.
(b) Whether or not the transactions contemplated by this Agreement and
the Financing Agreements shall be consummated, the Company hereby agrees to pay
on demand all reasonable out-of-pocket expenses incurred by the Purchaser. In
connection with the transactions contemplated by this Agreement and the
Financing Agreements and in connection with any
amendments or waivers (whether or not the same become effective) hereof or
thereof and all reasonable out-of-pocket expenses incurred by the Purchaser or
any of its affiliates in connection with the enforcement of any rights
hereunder, under any other Financing Agreement or with respect to any Security,
including without limitation (i) the cost and expenses of preparing and
duplicating this Agreement and the Securities; (ii) the cost of delivering to
the Purchaser's principal office, insured to the Purchaser's satisfaction, the
Securities sold to the Purchaser hereunder and any Securities delivered to the
Purchaser in exchange therefor or upon any exercise, conversion or substitution
thereof; (ii) the reasonable fees, expenses and disbursement of Riemer &
Braunstein, Purchaser's special counsel, in connection with the transactions
contemplated by this Agreement and the Financing Agreements and any amendments,
modifications, approvals, consents or waivers thereunder or thereunder; (iv) the
fees, expenses and disbursements of the Purchaser's accountants, in connection
with the Purchaser's due diligence investigation of the Company; (v) all taxes
(other than taxes determined with respect to income), including any recording
fees and filing fees and documentary stamps and similar taxes at any time
payable in respect of this Agreement, any Financing Agreement or the issuance of
any of the Securities; and (vi) all reasonable out-of-pocket expenses (including
without limitation reasonable attorneys' fees and costs, whether or not such
attorneys are the Purchaser's employees, all costs associated with any rights of
board attendance, observation or inspection and travel and lodging expenses
related thereto, and reasonable consulting, accounting, appraisal, investment
banking and similar professional fees and charges) incurred by the Purchaser in
connection with (A) the appropriate exercise, enforcement or preservation of
rights under this Agreement or any other Financing Agreement against the Company
after the occurrence of a Default or Event of Default (including engineering,
appraiser, environmental consulting and investment banking charges) and (B) any
appropriate litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to the Purchaser's relationship with the Company.
The Company hereby further agrees to indemnify, exonerate and
hold free and harmless the Purchaser and the Purchaser's stockholders, officers,
directors, employees and agents from and against any and all actions, causes of
action, suites, losses, liabilities, damages and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), incurred in any
capacity by any of the indemnitees as a result of or relating to (A) any
transaction financed or to be financed in whole or in part directly or
indirectly with proceeds from the sale of any of the Securities, or (B) the
execution, delivery, performance or enforcement of this agreement (including,
without limitation, any failure by the Company to comply with any of its
covenants hereunder), or any instrument contemplated hereby or thereby, except,
in each such case, for any such liabilities arising from any indemnitee's breach
of this Agreement, gross negligence or wilful misconduct.
The Company hereby indemnifies the Purchaser against and agrees
that it will hold the Purchaser harmless from any claim, demand or liability for
any broker's, finder's or placement fees or lender's incentive fees alleged to
have been incurred by it in connection with the transactions contemplated by
The obligations of the Company to the Purchaser under this
Section 8.3(b) shall survive payment or transfer of the Securities and the
termination of this Agreement.
SECTION VIII.4. ADDITIONAL PAYMENTS UPON MERGER, ETC. If at any time
within twelve (12) months after any date of repurchase, redemption, exchange or
conversion of any Notes, Warrants and/or Common Stock, the Company or any if its
Subsidiaries shall become party to any Triggering Event (as defined in the
Indenture) or the Company or any of its Subsidiaries or their respective
stockholders enter into any agreement or letter of intent contemplating any
Triggering Event or at such later time as any payment is received by the Company
or any of its stockholders in respect of such Triggering Event, the Company
shall make an additional payment to the Purchaser in an amount per share of
Common Stock (or Common Stock issuable upon conversion of the Notes or exercise
of the Warrant) repurchased from the Purchaser equal to the excess, if any, of
the value per share of the cash, securities and other property that the
Purchaser would have received (or that the Company received in which the
Purchaser would have had a beneficial interest as a stockholder of the Company),
had the Purchaser's Securities not been previously repurchased, but had been
repurchased as a result of such Triggering Event, over the payment received by
the Purchaser with respect to each such prior repurchase. Each payment to the
Purchaser pursuant to this Section 8.4 shall be made either in cash or in the
form of consideration received by the holders of common equity of the Company
(or the Company).
SECTION VIII.5. DOCUMENTARY TAXES. The Company agrees to pay any and all
stamp, transfer and other similar taxes, assessments or charges payable in
connection with the execution and delivery of any Financing Document or the
issuance of the Securities to the Purchaser, excluding its assigns.
SECTION VIII.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Company and upon the Purchaser and their respective successors and
assigns; provided that the Company shall not assign or otherwise transfer its
rights or obligations under this Agreement to any other Person without the prior
written consent of the Purchaser. All provisions hereunder purporting to give
rights to Purchaser and its affiliates or to holders of Securities are for the
express benefit of such Persons and their successors and assigns.
SECTION VIII.7. BROKERS. The Company represents and warrants that,
except for a commission of 5% payable by the Company to Dresdner Bank or its
Affiliate, it has not employed any broker, finder, financial advisor or
investment banker who would be entitled to any brokerage, finder's or other fee
or commission payable by the Company or the Purchasers in connection with the
sale of the Securities. The Purchaser hereby warrants that it has not employed
any broker, finder, financial advisor or investment banker who would be entitled
to any brokerage, finder's or other fee or commission payable by the Company in
connection with the sale of the Securities.
SECTION VIII.8. NEW YORK LAW; THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO CHOICE OF LAW PROVISIONS.
SECTION VIII.9. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated unless a failure
of consideration would result thereby.
SECTION VIII.10. COUNTERPARTS. This Agreement may be executed by telecopy
signature and in any number of counterparts each of which shall be an original
with the same effect as if the signatures there to and hereto were upon the same
SECTION VIII.11. REGISTRATION RIGHTS. The Purchaser and its affiliates
shall be entitled to exercise registration rights with respect to the Common
Stock issuable upon conversion of the Convertible Notes to the same extent as
set forth in the Warrants (as if such shares constituted Warrant Shares).
SECTION VIII.12. PUBLICITY. The Company shall not issue a press release
or otherwise publicize the sale or issuance of the Securities hereunder without
the approval of the Agent, except as may be required by law.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
AUTOBOND ACCEPTANCE CORPORATION
Address 301 Congress Avenue
Austin, Texas 78701
Fax: (512) 472-1548
Attn: Will Winsauer
BANCBOSTON INVESTMENTS, INC.
Exhibit A - Form of Opinion
Exhibit B - Form of Officer's Certificate